Venture Capitalist Explains How Patents Can Be A Tax On Innovation

from the not-all-vcs-demand-them dept

Whenever we get into discussions on the massive downsides associated with patents, someone has to chime in with some ridiculousness about how "venture capitalists won't invest in companies without patents." There are a few easy responses to that -- including, if the VC you're talking to demands patents to invest, he or she is probably so clueless you're better off going elsewhere. That may sound flippant, but it's not. Patents have so little impact on the success of a startup that anyone focused on patents before investing has probably never helped lead a brand new startup to success. If they had, they'd know that it's execution that matters significantly more than any "patents."

Besides, over the years, we've seen more and more venture capitalists come to the realization that in many cases, patents do a lot more harm than good. We've written about a few venture capitalists who have come out about problems with patents -- and over the weekend Union Square Ventures' Fred Wilson (a friend, and Techdirt reader), wrote about just how much damage patents have done towards innovation -- specifically with some of his portfolio companies. Specifically, he's talking about having those companies sued by non-practicing entities (he uses the term "trolls" which we like to avoid). He also mentions -- in the comments -- how USV doesn't require companies to have patents, and he's invested in plenty of companies without patents.

At one point, Wilson writes:

I'm a fan of allowing market forces to work in most cases, but not in the area of patents.

But, of course, patents are not a proper market mechanism. They're the opposite of one. They're about the gov't creating monopolies. That's not "letting markets work." It's declaring that the first company to claim an invention gets to control the market, rather than letting the actual market decide which company can best execute in delivering the product to the market. A supporter of free markets shouldn't support the patent system. It's not a free market at all.

From there, though, Wilson kicks off a good discussion on how to deal with such things. He points out that it's often cheaper just to pay off the patent holders (and most companies do that), but that just encourages them to continue creating a "tax on innovation." So, instead, he wants to discuss what reforms can be put in place, with two initial suggestions:

If you sue someone for infringement and lose, you pay the defendants' legal costs.

"Use it or lose it." If you're not putting the patent into practice, you don't get to use it.

There are problems with both of these, unfortunately. The first is utterly dependent on the already screwed up judicial process for patent lawsuits (hello East Texas!). There are plenty of awful patent lawsuits where the patent holder wins. So, I'm not against this proposal as a way of making patent holders think twice about totally bogus lawsuits, but it's not going to stop a lot of suits. In fact, it may just encourage more suits in the hopes that hitting one "big one" pays for all the bad ones.

The second one is also a little troubling, because if a patent is valid (a huge if), you could potentially see a situation where it makes sense for the company to license it rather than develop it. Instead, however, I'd offer an alternative: if the patent holder is not developing a product based on the patent, then (a) the courts cannot issue any kind of injunction to stop the production of the product by others (which is the direction we're moving in thanks to the MercExchange decision) and (b) any damages should be greatly limited to the cost of a reasonable license plus a small penalty.

However, if Wilson is serious about looking for ways to fix the patent system, he should look to support an independent invention defense that would invalidate the patent. This one change would solve so many of the problems with the patent system. Since the patent system was designed to encourage independent invention, it shouldn't be discouraging it and denying those inventors who came up with an idea on their own the ability to commercialize their inventions. Furthermore, since patents are only supposed to be granted on inventions that are non-obvious to a person skilled in the art, the fact that multiple individuals came up with the same idea should be proof enough that the idea doesn't pass that test.

It's no secret that I'm not a fan of the patent system at all. There is so much evidence out there that patents do nothing to increase innovation and plenty of evidence to show how they actually stifle innovation, that I think the patent system actively works against its stated purpose ("to promote the progress of science and the useful arts"). However, if we must have such a system, then put in place an independent invention defense which also invalidates the patent, and we'd be a lot further towards a reasonable system -- especially since it's so rare to find patent infringement lawsuits that involve any actual copying.

You are wrong

The whole idea with the patent system is the protection of inventor's right so that he shares his innovation/knowledge with the public. This increases the collaboration on innovation.

The englightment of Man came with the proper patent system. Without the protection of patents, everyone will keep their innovation/knowledge as their trade secret.

There are situations it seems like patents are issued to obvious innovations, such as ipod wheel, and blocks competition. Yet the patent law encouraged Apple to innovate Ipod wheel while all the other companies were fooling around wrong solutions. Now it is Apple's right to use the patent for competitive advantage since they came up with the solution, invested in it and take the risk. It will be absurd to let freeloader to imitate IPod's solution.

I am not sure why this site consistently points out the edge scenarios in the patent/copyright laws as the overall system is useless and problematic since they are smart enough to understand their benefits.

Re: You are wrong

The whole idea with the patent system is the protection of inventor's right so that he shares his innovation/knowledge with the public. This increases the collaboration on innovation.

If only there were some evidence that this actually happened. Instead, we've seen a ton of evidence that it has *decreased* collaboration and *decreased* innovation, and is often used by companies to block others from innovating.

The englightment of Man came with the proper patent system. Without the protection of patents, everyone will keep their innovation/knowledge as their trade secret.

This is a myth that has been debunked so many times it's almost not worth mentioning. First of all, if trade secrets were so great, companies would still use them instead of patents. The only reason to get a patent instead of a trade secret is if you *know* that the "secret" won't last the length of the patent. So, the fear of "trade secrets" is totally overblown. Most things won't be kept as trade secrets, because they can't.

Furthermore, as more and more businesses are learning the benefits to being *open* and *transparent* those who rely on trade secrets will increasingly lose out to those who don't.

There are situations it seems like patents are issued to obvious innovations, such as ipod wheel, and blocks competition. Yet the patent law encouraged Apple to innovate Ipod wheel while all the other companies were fooling around wrong solutions. Now it is Apple's right to use the patent for competitive advantage since they came up with the solution, invested in it and take the risk. It will be absurd to let freeloader to imitate IPod's solution.

Why would it be absurd? Competition is good, right?

I am not sure why this site consistently points out the edge scenarios in the patent/copyright laws as the overall system is useless and problematic since they are smart enough to understand their benefits.

We don't point out "edge scenarios." We have discussed tons of research that all show the same thing: there is no evidence that patents increase the pace of innovation, and an awful lot of evidence that shows it decreases the pace of innovation.

petition drive

This was suggested before and bears advising again. Would you and/or many of the more learned guests of patents/legal system/etc. collaborate together an implementable replacement/upgrade to the current system. Leave what you have: drafts, notes, suggested additions in a side frame on your site for everyone to pick at, tweek, append like the linux system/wikipedia/etc. E-mail relevant entities to do the same. You, yourself could start to revolutionize the system and fix the problems you see today. You have the following necessary for the job and the country would be better off, if only by the example you had made.

Patents don't account for the natural series of events

A friend recently shared with me a documentary called "The World According to Monsanto". It's a documentary which discusses how Monsanto created a series of genes which were spliced into seeds for foodstuffs and sold to farmers under an intellectual property agreement.

According to the documentary, during the Clinton Administration, a number of revolving door events occurred which assisted Monsanto to push forward changes in US Public policy which allowed the FDA and US Agriculture Departments to veer from food safety issues under the previously accepted criteria of "Certainty of No Harm" to a principal of "Substantial Equivalence". These changes in policy towards genetically modified organisms and bio-technology in general allowed Monsanto to develop seeds which would survive Monsanto's herbicide, but without scrutiny of the consumable food products similar to what food additives would incur.

As a customer of Monsanto (read:farmer), you would have to sign a intellectual property agreement to plant the seeds during a certain growing season. All this on the surface sounds okay, but what happened next was interesting to say the least--

While planted, the Genetically Modified Organisms started pollinating with other farmers crops and ultimately creating new seed with the identifiable gene. Monsanto even went so far as to trespass on farmers land to gather samples and started filing lawsuits against farmers for willful infringement of their patent portfolio resulting in a large number of multi-generation farmers facing bankruptcy.

At the same time, genetically modified organisms were allegedly delivered in unmarked bags and sold on the grey market outside the US. In Paraguay, the problem of Genetically modified seeds was so pervasive that the Ministry of Agriculture, Roberto Franco, had to authorize similar (read: lax) US Policy towards Genetically Modified Organisms because they already existed enmasse. In the process, by legitimizing the GMOs, patent royalties could be collected on the entire crop, legitimate or not.

To date, Monsanto has apparently created identifiable genes in other commodity goods such as cotton, soybeans, corn and others and is collecting royalties on entire countries production and exports for these commodity goods.

After seeing the documentary, (It's French, so it can be a little odd. Start maybe 1/2 way in) you have to admit that it's no wonder why so many countries hate America.

patents are not a proper market mechanism (WTF?)

This is the most absurd proposition to be yet foisted over the wall by the anti-patent propaganda machine:

"But, of course, patents are not a proper market mechanism. They're the opposite of one. They're about the gov't creating monopolies. That's not "letting markets work." It's declaring that the first company to claim an invention gets to control the market, rather than letting the actual market decide which company can best execute in delivering the product to the market. A supporter of free markets shouldn't support the patent system. It's not a free market at all. "

Now hold on a cotton-flippin second there ... Are you saying an inventor's labor has no value in a market place?

If so, then by logical extension, no one's labor should have value.

An example in point: Suppose you were first to dig a trench with the sweat of your brow, but just as you are finished and at the point of total exhaustion, a Tech-Dirt scoundrel who is the size of a 500 LB gorilla shows up. He kills you, hides the body and claims he dug the hole and he (the 500 LB gorilla) is the one who deserves to be paid for the hole because he better "executed" (heh heh) in the "free for all" market place and he was first to "deliver product". According to your logic, "The Market" should reward this 500 LB murderous gorilla and to heck with the rights of the person who first dug the trench but failed to deliver because he couldn't fight off the 500 LB gorilla. What kind of sick and perverted world do you want us to live in?

An example in point: Suppose you were first to dig a trench with the sweat of your brow, but just as you are finished and at the point of total exhaustion, a Tech-Dirt scoundrel who is the size of a 500 LB gorilla shows up. He kills you, hides the body and claims he dug the hole and he (the 500 LB gorilla) is the one who deserves to be paid for the hole because he better "executed" (heh heh) in the "free for all" market place and he was first to "deliver product". According to your logic, "The Market" should reward this 500 LB murderous gorilla and to heck with the rights of the person who first dug the trench but failed to deliver because he couldn't fight off the 500 LB gorilla. What kind of sick and perverted world do you want us to live in?

Whoa, man. Let's try to back down that mountain, and not come up with a ridiculous strawman we never argued for.

The linked article has been generalized a bit since the individual was talking only about software and business methods, and qualified his comments accordingly. Moreover, it was limited to so-called "trolls", and the word "trolls" was defined to exclude situations such as an inventor trying to license his/her invention.

I know I am being "picky", but this sentence is a bit unclear:

It's declaring that the first company to claim an invention gets to control the market, rather than letting the actual market decide which company can best execute in delivering the product to the market.

I am not at all sure how one claiming an invention gets to control a market.

You Don't Have to be Clueless

With all due respect to this posting, as a VC who cares about IP I don't think that I am clueless. Intellectual property rights can be an emerging business' best friend under certain circumstances. It depends upon the business model. I have invested in open source businesses and proprietary business models. It just depends. Perhaps it would be better to say that for Web 2.0 businesses Patents are of dubious quality, because of the business model and reliance on execution and hosted software that isn't open for reverse engineering -- but there is still IP. It's in the knowhow, processes and UI.
There is a place in our economy for inventors to benefit from their hard work and receive a monopoly right on their invention. If you are reacting to the use of patents by large companies to inhibit competetion that is something different perhaps. But, that could be more properly addressed if the government enforced the antitrust laws.
In short, the ability to protect intellectual property has been a major driver in rewarding innovation in our economy for the last 100 years. The idea that this should not continue to be the case, or that people who create business models that rely on intellectual property rights are idiotic, just cheapens a very good conversation that should be had about who should get and control patent rights. It's an issue of economic power but to suggest that Patents are uncessary in today's world is far too broad an assertion.

Re: patents are not a proper market mechanism (WTF?)

Now hold on a cotton-flippin second there ... Are you saying an inventor's labor has no value in a market place?

Depends on the innovation. Effort is not properly valuated in many situations. Do you own a TiVo?

If so, then by logical extension, no one's labor should have value.

Sigh. Not really. But go on.

An example in point: Suppose you were first to dig a trench with the sweat of your brow, but just as you are finished and at the point of total exhaustion, a Tech-Dirt scoundrel who is the size of a 500 LB gorilla shows up.

Oooh! Scary. I like horror films.

He kills you, hides the body and claims he dug the hole and he (the 500 LB gorilla) is the one who deserves to be paid for the hole because he better "executed" (heh heh) in the "free for all" market place and he was first to "deliver product"

That's a little weird. Listen, you have some trust issues. I won't even continue to read your comment.

According to your logic, "The Market" should reward this 500 LB murderous gorilla and to heck with the rights of the person who first dug the trench but failed to deliver because he couldn't fight off the 500 LB gorilla.

Okay I lied. Do you invest with AXA Eqitable? I'll let you off if you say yes. They have a 800lb Gorilla in their ads. He's quite congenial.

What kind of sick and perverted world do you want us to live in?

One where you don't have to worry about extending existing art, and also takes into account the natural occurrence of events.

Re: Patents don't account for the natural series of events

Are you sure that is correct? What "intellectual property agreement" would that be? I thought the farmers signed a contract; i.e., the farmers were bound by contract law, not intellectual property law. I believe some farmers were sued by Monsanto under contract law for replanting Roundup ready seeds. Reference the articles regarding such suits below:

If you consider what Monsanto has done, it is the equivalent of asking a book purchaser to sign a statement that they will not permit a book to be copied and if they do, face severe penalties. Interestingly, farmers continue to buy hundreds of millions in Roundup ready seeds even though many of their number have been sued.

"Even if we cannot disentangle the causal relation between patents and successful investments, the fact that patents are correlated so robustly with successful investments suggests that a software venture-investment cycle without patents would be different from the one we have now."

The same authors also point out that any "serious debate regarding the propriety of patents in the software industry must account not only for the possibility that patents might impose substantial costs, but also for the possibility that they provide substantial benefits."

Here is yet another study, this time from Europe, indicating that patents are important to attract venture capital funding:

I would keep going, but the point is made. Hundreds of venture capital and private equity firms care about patents, and feel patents are an important part of initiating investment.

What is more interesting is that several of these sources seem to indicate that venture capitalists stifle innovation, whereas patents and innovation seem to go hand-in-hand...maybe Mike will write about that.

Re: You Don't Have to be Clueless

With all due respect to this posting, as a VC who cares about IP I don't think that I am clueless. Intellectual property rights can be an emerging business' best friend under certain circumstances.

Thank you Jonathan for your views. I happen to have a few questions:
1) How much value do you put in copyright and patent law?
2) When investing, does your business plan account for changes to patent or copyright law like the Bilski Decision?
3) Would you still invest in a company with little to no copyright portfolio, but could execute properly?

Re: Re: Re: Patents don't account for the natural series of events

Egon:

According to the sites where this "documentary" is located, it is 109 minutes long. Since the few things I have read about the "documentary" indicate it is primarily a diatribe against Monsanto, it is likely that they inappropriately called the contracts some sort of intellectual property agreement. Do you have an unbiased source for these "intellectual property agreements"?

Re: patents are not a proper market mechanism (WTF?)

Now hold on a cotton-flippin second there ... Are you saying an inventor's labor has no value in a market place?

How do you put value on the labor of "invention"?

One person may spend years inventing an item, while another trips upon something completely unique by accident. One person may take five years to invent something another person invented in several months (think the race to TV). And yet another person may invent something but be so far ahead of his/her time that the patent has long slipped away before a useful purpose is applied and marketed.

Why should the person who gets lucky be entitled to more than the person who toiled for years or was in the wrong place at the wrong time?

In your line of thinking the labor of a person who dug a 100 foot long, 4 foot wide and 5 ft deep ditch with a shovel is worth more than another person who used a backhoe. Why? Because he worked harder? We know this to not be true because the value of the resulting ditches are identical.

And since ultimately invention is a process of discovery and application of discovery, applied trial and error, why should the labor of making that discovery be more valuable than the implementation and production? In short why should the person who put a year into discovery (invention) be awarded more than a year's pay?

Re: Re: You Don't Have to be Clueless

Here is an article that suggests, according to a study performed in 2000, that patents tend to stimulate venture capital investments.

No one said that VCs were smart. In fact, I think many of them are not very smart.

"Even if we cannot disentangle the causal relation between patents and successful investments, the fact that patents are correlated so robustly with successful investments suggests that a software venture-investment cycle without patents would be different from the one we have now."

Different doesn't mean better.

The same authors also point out that any "serious debate regarding the propriety of patents in the software industry must account not only for the possibility that patents might impose substantial costs, but also for the possibility that they provide substantial benefits."

Um. Talk about vague and useless statements.

Here is yet another study, this time from Europe, indicating that patents are important to attract venture capital funding:

Again, no one said that there aren't a lot of dumb VCs out there. I'm not sure what you think you're proving.

We know that there are plenty of stupid VCs who think that you need patents before they'll invest. But claiming that you can't get VC money without patents is a flat out lie -- and we're seeing incredibly successful VCs who don't focus on patents.

T he National Venture Capital Association, representing 480 venture capital and private equity firms, cautioned Congress in patent reforms because patents are important to small start-up companies:

Again... same point as before. There are lots of bad VCs out there.

I would keep going, but the point is made.

Yup. That there are lots of bad VCs. But you haven't shown that you need a patent to get an investment or that patents are good for innovation.

Hundreds of venture capital and private equity firms care about patents, and feel patents are an important part of initiating investment.

Yup. And you know how many of those VC firms are successful? Not too many...

What is more interesting is that several of these sources seem to indicate that venture capitalists stifle innovation, whereas patents and innovation seem to go hand-in-hand...maybe Mike will write about that.

Indeed. I believe that many VCs are quite bad for innovation and have said so many times in the past.

Re: You Don't Have to be Clueless

With all due respect to this posting, as a VC who cares about IP I don't think that I am clueless. Intellectual property rights can be an emerging business' best friend under certain circumstances.

What are those circumstances? As far as I've seen, they appear to only be in cases where the company that holds those patents can't actually compete in the marketplace. The only time patents actually come into play with startups tends to be when they're failing.

It depends upon the business model. I have invested in open source businesses and proprietary business models. It just depends.

Can you give an example of where a patent was necessary for success, rather than as a tool to bring down competitors?

Patents are of dubious quality, because of the business model and reliance on execution and hosted software that isn't open for reverse engineering -- but there is still IP. It's in the knowhow, processes and UI.

Sure, but there's no reason to protect that. The knowhow, the process and the UI are simply part of the overall process to bringing a company to success. You don't need to protect those, you need to focus on delivering something customers actually want.

Hint: they don't want patents.

There is a place in our economy for inventors to benefit from their hard work and receive a monopoly right on their invention

There is absolutely a place in our economy for inventors to benefit from their hard work. And it's in making a product and selling it in the market place.

As a supporter of basic economics, I have *serious* trouble with the idea that there's a place for granting a monopoly right without any evidence of market failure. I mean, that's just *bad* for everyone.

In short, the ability to protect intellectual property has been a major driver in rewarding innovation in our economy for the last 100 years.

There's very very very little evidence to support that. There's an awful lot of evidence suggesting the opposite. The *reward* for innovation is in the market place. Patents tend to hold back competition, limit a market, keep it smaller and decrease the overall rewards. Often, it sets bad incentives in rewarding the *loser* in the marketplace.

It's an issue of economic power but to suggest that Patents are uncessary in today's world is far too broad an assertion.

Why? The more evidence you look at, the more trouble you'll have seeing any value at all in patents. They're protectionist and damaging in almost every case.

Re: Re: Re: Re: Patents don't account for the natural series of events

Since the few things I have read about the "documentary" indicate it is primarily a diatribe against Monsanto

Not surprising. At 1:35 of the Documentary, it is noted of a smear campaign that occurred after an article of GMOs in Nature Magazine. "Mary Murphy" posted negative responses to the scientific community regarding her decent towards the article. A second response from "Andoura Smetacheck" corroborated the original response. Mary Murphy's response was from a Monsanto's PR Firm (The Bivings Group) and Andoura Smetacheck's response was from an IP address (199.89.234.124) registered to Monsanto.

So it's not surprising that what you found regarding the documentary was "a diatribe".

Re: Re: Re: You Don't Have to be Clueless

Mike:

I agree with you. A world without patents would be different and not necessarily better.

Regarding your comment about "vague and useless statement," I respectfully disagree. Their conclusion was that if you are going to debate damages caused by patents, you should also, particularly if you are going to be objective, consider the benefits that patents bring. I like this statement a lot because many people who have expressed anti-IP positions are so rabid that they will consider no positive benefit to IP, which of course flies in the face of substantial evidence, even from such staunch IP foes as Boldrin and Levine. Oops, got distracted from the point. If you are going to have a scientific debate over IP, both the pros and cons should be weighed, otherwise, the debate is no longer scientific, it is a witch hunt.

As for my other comments, they were made in support of the comment to which I appended my comment.

As for your comment that "many VCs are quite bad for innovation and have said so many times in the past," the research papers and articles I linked to were the first time I heard that statement. The evidence is clear and overwhelming that VCs generally cause a reduction in innovation.

You also said that I had not shown that patents were necessary to get investment or that patents were good for innovation. Actually, I was not trying to show either; I was merely pointing out articles that discussed the relationship between VCs and patents. The research papers and articles clearly indicated that startups with patents attracted more VC money than those without. As for patents and innovation, any comments I wrote relating the two were from the papers and articles. As I have said in the past, having a patent is not a requirement for innovation, though the opposite must assuredly be true. The only question is whether the innovation rises to the level of invention.

Neither is it surprising that the "documentary" refers to a contract as an intellectual property agreement.

Maybe I am missing something here. The "Contract" creates specific uses for patents numbered, and also catalogs and quantifies patents in question. It permits use of the product (the seed) for a defined period of time, and also lists acceptable and prohibited use of the seed and covered patents. In my mind, this is a licensing agreement for the listed patents. No?

But your getting offbase. Plants breed, and create new plants, sometimes from pollen blown from across the road. The reality is not idealic.

The contract specified that a farmer was buying seed from Monsanto, and the contract had certain limitations built into it. The inclusion of patent numbers in the contract is merely a clause, and still does not make the contract an intellectual property agreement. It remains a contract.

I have no idea what your final statement means. I was only discussing farmers that were sued by Monsanto after having purchased seed from Monsanto and then violated the terms of their contract.

Re: Re: Re: Re: You Don't Have to be Clueless

Agreed. Good Debate, Lonnie. To add, the point I was trying to make was that if Patent system goes unchecked, a well-funded multinational can leverage it's position to create policy decisions which may not be beneficial to local or international society. If an intellectual property holder is left unattended to for a long time, it can present unique State Policy issues. Especially if it requires Foreign Governments to adopt lax regulations of the IP holder's home country.

This can later present downstream effects and challenges on trade and less valuation on the intellectual property system as a whole. Just because you have an idea doesn't mean it should be put into production, especially if it doesn't account for the environment it will be deployed in.

Re: Re: Re: You Don't Have to be Clueless

AC:

Depends on your definition of "almost every case," and depends on your definition of value or benefit.

Many people like to argue that patents are a diversion of investment. Actually, they are. They divert investment from short term investments to longer term investments. They may also make certain investments that might otherwise not be profitable (pharmaceuticals being one major example), profitable. There are those who believe (and I have always thought faith is a great thing in a religion) that if patents did not exist that the same drugs would still be created.

However, here is the real problem. All these studies that purport to be undeniable proof of the evil of patents actually cite a few cases and then stop. Where is the comprehensive study of 100,000 patents, or 500,000 patents? The studies do not exist. Boldrin and Levine, for all their fanfare regarding evidence that patents are "bad" (beware of value statements in a supposedly scientific paper), actually are focused are a teensy fraction of patents.

I am still looking for the objective, comprehensive study of patents that either shows in balance that they have been a benefit to society, or that they have not. The vast majority of the currently available studies fail the first word, and certainly all those from the anti-IP crowd.

Re:

Looks like a contract, smells like a contract, tastes like a contract...That the contract says that you will not violate the terms of various patents is irrelevant. Even more important, if every single patent on the list was invalidated, the contract would still be valid.

I was only discussing farmers that were sued by Monsanto after having purchased seed from Monsanto and then violated the terms of their contract.

Correct, but in the US, there have allegedly been cases where farmers have been sued by Monsanto who have not engaged in any contract with Monsanto. Monsanto allegedly sues on the basis of willful infringement, from the basis of a patented gene existing on a crop, obtained by Monsanto by trespassing. In other countries, such as Argentina, Monsanto allegedly lets the crop grow to the point where it reaches critical mass and then requests Government Policy decisions where it can then collect royalties on an entire countries crop.

Re: Re: Re: You Don't Have to be Clueless

You almost had me there. For a minute I thought you might be serious.

I'm incredibly serious. Anyone who's built a successful business knows that it's about serving your customers and growing your market. "Protecting" is the last thing on your mind. If you're focused on protecting anything, you've already failed.

Re: Re: Re: Re: You Don't Have to be Clueless

Regarding your comment about "vague and useless statement," I respectfully disagree. Their conclusion was that if you are going to debate damages caused by patents, you should also, particularly if you are going to be objective, consider the benefits that patents bring

Absolutely. And I agree wholeheartedly. Now, if only you could actually show what BENEFITS patents bring. I'd love to see 'em, because so far, no one seems willing to share any *other* than the fact that it may divert some money to the company that holds a patent, but does little for the overall market, and in the long run does little to help the company that holds the patent.

As for your comment that "many VCs are quite bad for innovation and have said so many times in the past," the research papers and articles I linked to were the first time I heard that statement. The evidence is clear and overwhelming that VCs generally cause a reduction in innovation.

We're in agreement. This is also why *most* VCs don't provide very good returns. If you look closely there's a very small number of VCs who provide most of the returns that makes the entire sector look good. So look for the overperforming VCs. And... I'll give you a hint: Fred's among them.

You also said that I had not shown that patents were necessary to get investment or that patents were good for innovation. Actually, I was not trying to show either; I was merely pointing out articles that discussed the relationship between VCs and patents.

But that had nothing to do with the point we were making. You showed that there are plenty of clueless VCs out there from whom you shouldn't take investment. We agree.

But that hardly is relevant to the post, which is to refute the claim that you need patents to raise VC or that good VCs require patents.

Re: Re: Re: Re: You Don't Have to be Clueless

Many people like to argue that patents are a diversion of investment. Actually, they are. They divert investment from short term investments to longer term investments. They may also make certain investments that might otherwise not be profitable (pharmaceuticals being one major example), profitable. There are those who believe (and I have always thought faith is a great thing in a religion) that if patents did not exist that the same drugs would still be created.

This is misleading and wrong. There is little evidence to suggest that patents divert short term investments into long term. In fact, I'd argue alternatively that the opposite has been shown to happen -- because patents create patent thickets that make long term investment much more difficult.

Separately, your point about pharma is also totally off-base. You again are focused on pharma, ignoring that without pharma patents the solutions to healthcare issues might not be *pharma* based at all. The problem with patents is that they've directed almost *all* research dollars in this area into *pharma* instead of into *healthcare*.

Furthermore, as we were just discussing the synthetic dye industry in Switzerland, it's worth pointing out that that industry birthed the modern pharma industry -- and plenty of innovation was occurring PRE-PATENT. In other words, it's not "faith," it's evidence-based.

We go back and forth on this, but it seems that you are the one who has a faith-based problem. Insisting that because some companies hold patents that there is evidence that they work.

Again, there is no economic evidence to support that. And we KNOW for a fact that the only reason to put in place protectionist policies is in the event of a market failure. But no one has explained what market failure requires patents. No one.

We're all for *property* (yeah, right. Was market mechanism (WTF?))

Mike wrote:

(1) We're all for *property* ownership of real, tangible (scarce) property.
[2] ... please, don't be ridiculous.
[3] ... Patents are about selling the "idea" not the actual labor.
[4] ... Let's try to back down that mountain, and not come up with ridiculous strawmen

"Property" and "ownership" are merely man-made legal fictions as are "patents". There's nothing real or tangible about any of it. If you truly are all for ownership, then you are inherently in favor of intangible rights.

Here's a simple straw-person proof regarding "ownership" of tangible property and why it is actually a fiction:

(a) You buy a metal cage. Ergo you "own" the real, tangible, metal chunk of property.
(b) You buy a ferocious lion and put him inside the metal cage. Ergo you "own" the lion.
(c) You step empty-handed into the cage and lock the door behind you.
(d) Now tell us who "owns" whom and what. So much for your fictionalized ideas about "ownership" and reality. None of them were real. It was all made up; as you will shortly see when the lion explains to you that it is he he owns the inside of the cage.

"Patents" are just another man-made legal fiction just as are ALL ideas about ownership rights.

So if you're all about destroying patent rights, there's not much to stop you from being all in favor of destroying other legislatively created rights ... like (1) rights to "own" real estate, (2) rights to "own" personal chattels, (3) rights under the Bill of Rights, need we go on? For you, obviously yes.

The current legislation about patents is written such that one cannot own an "idea".

One can only have exclusive rights for a limited term of years to a claimed machine, a claimed process, a claimed manufacture, a claimed composition of matter or a claimed improvement thereof. See 35 USC 101.

So when you argue, "That's not what patents do. Patents are about selling the "idea" not the actual labor.", it is you who is marching up to that deceptive mountain top. Patents are about compensating the "Whoever" that invented the claimed machine, the claimed process, the claimed manufacture, the claimed composition of matter or claimed improvement thereof. See again 35 USC 101.

For most people, inventing is labor. It is often, hard, hard labor; with many false starts and many dead ends.

It is only for smug and dismissive people like yourself that all the false starts plus dead ends get wiped from the accounting slate, that the workproduct is converted into a socialist freebie for all to take according to their needs. And then you have the audacity to claim that you are all for "ownership"? No you're not. You're all for dis-ownership; particularly when it comes to the labors and workproduct of unindentured inventors (those not owned by, and assimilated into, the corporate Borg).

"Property" and "ownership" are merely man-made legal fictions as are "patents". There's nothing real or tangible about any of it. If you truly are all for ownership, then you are inherently in favor of intangible rights.

No. You are clearly ignorant of the purpose of property. *Property* is (as you describe) a legal fiction -- but the *PURPOSE* of property was for the efficient allocation of *SCARCE* resources. That is, if I have something, you cannot have it at the same time. And, to avoid people fighting over those things and to understand how to allocate those resources, the legal fiction of physical property was created.

The same is not at all true for patents. In the case of a patent, you are not dealing with a scarce resource, but an infinite one. In such cases there is no need for efficient allocation because anyone who wants a copy can have it. Thus, property rights make no sense. They are not useful in determining who is the "rightful owner" of a scarce piece of property, because there is no dispute. Everyone can own their "copy" because there are infinite copies possible.

So, no, patents are not at all like property rights.

So if you're all about destroying patent rights, there's not much to stop you from being all in favor of destroying other legislatively created rights ... like (1) rights to "own" real estate, (2) rights to "own" personal chattels, (3) rights under the Bill of Rights, need we go on? For you, obviously yes.

Try not to be so ignorant. It doesn't become you. I have explained my reasoning above.

One can only have exclusive rights for a limited term of years to a claimed machine, a claimed process, a claimed manufacture, a claimed composition of matter or a claimed improvement thereof. See 35 USC 101.

Indeed. That does not change the point. Nor does it change the fact that so many patents these days are so broadly and vaguely written as to encompass an "idea." But that's not really germane to the point.

Patents are about compensating the "Whoever" that invented the claimed machine, the claimed process, the claimed manufacture, the claimed composition of matter or claimed improvement thereof. See again 35 USC 101.

This is also false. If I invent the claimed machine, process or whatever... and someone else invented it first, then I am not protected. In fact, I cannot make and sell the very thing I invented. That's a massive problem.

Also, you may quote 35 USC 101 as much as you want, but I will quote the Constitution:

"To promote the progress of science and useful arts..."

In other words, if the patent (or the system itself) serves to NOT promote the progress, or even to *hinder* the progress, then it is unconstitutional.

For most people, inventing is labor. It is often, hard, hard labor; with many false starts and many dead ends.

No doubt. Who said otherwise? The problem is with ignorant souls such as yourself who seem to think that the *labor* itself is worth rewarding, rather than having the *market* reward the *success* of bringing a product to market.

It is only for smug and dismissive people like yourself that all the false starts plus dead ends get wiped from the accounting slate, that the workproduct is converted into a socialist freebie for all to take according to their needs.

You are more clueless than I imagined. You champion a system of a centralized gov't bureau handing out monopolies, and then claim *I* am socialist? You champion a system of rewarding people for their *labor* rather than what the market rewards them and then claim *I* am the socialist?

I am in favor of a truly free market capitalist approach. Let the actual market decide.

And, furthermore, before you make any more ridiculous "socialist" comparisons, let's wipe that out of your thought process. Socialism is about communal ownership, where everyone owns it. That's not what we're talking about at all. What we're saying is a true free market solution, where the market determines the price -- and the price of an infinite good is zero (infinite supply). Go learn some economics.

And then you have the audacity to claim that you are all for "ownership"? No you're not. You're all for dis-ownership; particularly when it comes to the labors and workproduct of unindentured inventors (those not owned by, and assimilated into, the corporate Borg).

Wow. In actuality, it is the system you favor that creates "the corporate Borg." Studies that have compared societies with patents to similar ones without them have shown that those without tend to have many more small firms working and competing in the market. It is only *after* the introduction of patents, that creates massive conglomerates that eat up the patents and slow down innovation.

You speak from massive amounts of ignorance, and it reflects poorly on you.

Exposes herd mentality

Great to see you open up this can of worms. It's sad how many people accept this government protection racket (patents) as essential to innovation. The reality is that it's just another "corporatist" scheme to fatten profits.

And when you start to open some of their eyes to a world without patents, they always throw the pharma example as their last defense. Your counter to that is good. I'll add that the government can use FDA approvals or other ways to give drug companies a boost if required. There's no excuse to hold free innovation and development hostage in all other industries.

Venture Capitalism and the Patent System.

In reading the comments in this, it stuns me to see just how clueless many people are regarding capitalism, especially when they believe patents must be utilized in order to generate it.

Ignorant, if not pathetic.

Speaking of ignorant: It will be absurd to let freeloader to imitate IPod's solution.
Then Apple owes the company who put a wheel in a mouse quite a few pennies for freeloading.

This example should be more than sufficient to all these patent defenders the system doesn't protect anything but profits.

If it doesn't, I offer my pity to your ignorance.

I don't believe the patent system needs a reform. It needs to be abolished. There is no reason the system should exist, and the patent system only supports a monopoly which, ironically, is illegal.

(b) any damages should be greatly limited to the cost of a reasonable license plus a small penalty.
Absolutely unreasonable at any cost. There should be no reason why compensation should be paid out by a competing business.

Never, once, was the patent system designed to be the governor of competition, yet this is exactly what it is used for today.

Re: Re: Re: Re: Re: You Don't Have to be Clueless

Egon:

One of my favorite lines from "Jurassic Park" is when Jeff Goldblum's character muses about the difference between being able to do something and whether that something should actually be done (lots of paraphrasing here).

It appears to me that you are moving from purely intellectual property issues into issues of influence and environmental affect.

I certainly agree that a large company can affect government policy, and have. I also agree that companies frequently do things that are not necessarily in the best interest of man, society or the environment. Companies have done these things in the past and they have used techniques other than intellectual property to accomplish them.

I think that intellectual property is just a "flavor-of-the-month" for many companies seeking to influence events to a greater degree than they should be allowed. As with all things, intellectual property's effect is being adjusted by the courts and eventually by Congress, and then companies seeking a greater influence will move on to the next technique to influence society and events.

I read one story about a farmer in Canada that was supposedly sued by Monsanto for patent infringement because his crop was pollinated by a Roundup ready crop adjacent to his. I am unsure of the result of that suit, but I doubt Monsanto would prevail, assuming that the pollination was in fact outside the farmer's control. There is no equity in such a suit.

As for Monsanto's alleged actions in Argentina, I find it hard to believe that Monsanto would do something as obviously stupid as that. As has been expressed a number of times in international conferences on intellectual property, IP should never stop a country from feeding its people and providing basic services.

I did run across a more interesting discussion relating to the development of plant varieties. There is a lot of discussion that genetic manipulation is in fact detrimental in the long term because it promotes reliance on a few varieties, reducing variation and making crops susceptible to disease. Apparently there is some evidence that this has already happened in some instances, and we are in a race to stay ahead of disease for some crops. The opponents of genetic manipulation believe that we should focus on naturally grown crops, relying on variety to reduce susceptibility of one variety to be wiped out. I believe that argument has merit.

Re: Re: Re: Re: Re: You Don't Have to be Clueless

Mike:

It is virtually impossible to show "benefits" from patents when you can always claim that patents cause a diversion of money. The second is absolutely true. Patents do cause a diversion of money. The question is whether the diversion is more beneficial to society than the use it would have otherwise been put to.

On the other hand, just as I am unable to prove that the "diversion" is more beneficial than what the money would have been spent on otherwise, I am unable to prove that lack of diversion is more beneficial than diversion. Free marketers claim that non-diversion is more beneficial because they have faith in the free market, even though the "free market" was a failure at the outset and prompted regulation, even in ancient times. I have more faith in patents than I do in a free market. At least I can see what I am getting with a patent.

Further Patent Reform

"if the patent holder is not developing a product based on the patent, then (a) the courts cannot issue any kind of injunction to stop the production of the product by others"

I would take this a step further. One of the greatest mistakes I think the PTO made was to no longer require working models of 'inventions'. I'll bet my next paycheck many of the software patents would fail simply because the 'inventor' doesn't have a clue how to write the code to execute their 'unique, non-obvious idea'. The same could be said for many of the business process 'inventions' as well. Make inventory demonstrate their unique invention as part of the patent process. That would slow down the general trend to patent everything then let the courts sort it out and it would refocus everyone on patenting real inventions, not simply descriptions of an idea for an invention.

Re: Re: Re: Re: Re: You Don't Have to be Clueless

Mike:

I keep running mathematical scenarios regarding patents and investment paybacks. The problem I have is that without patents, the investments all focus into investments that payback in 1 to 3 years. If I cheat a little, I can stretch as far as 5 years. If lack of patents makes any investment with more than a 5 year payback economically undesirable, we are handicapping growth in entire industries, particularly manufacturing industries, excluding most, but not all, electronics.

As for pharma, at least for the United States that does not appear to be accurate. Somewhere around 40 to 50% of all R&D dollars in the U.S. are focused on pharm. The remainder is focused in other areas. I do not know about other countries.

Furthermore, as we were just discussing the synthetic dye industry in Switzerland, it's worth pointing out that that industry birthed the modern pharma industry -- and plenty of innovation was occurring PRE-PATENT. In other words, it's not "faith," it's evidence-based.

Except, this statement is not complete. According to various sources on the internet, Swiss chemical companies began being inventive in the late 1880's. Interestingly, Swiss chemical companies began patenting in other countries, protecting their inventions in other countries, in advance of the 1907 change to Swiss law that permitted patenting of those same inventions in Switzerland.

So, Swiss chemical companies were among the worst hippocrites. They opposed patents in their home country because that would have prevented them from copying the inventions of companies in other countries, and yet they took advantage of patents in other countries to prevent the companies they were copying from copying in return.

Swiss chemical companies became even worse with time. They formed cartels with German and French companies to control prices, market and supply, and only abandoned cartels in 1951 when the United States was looking into trusts.

Most interestingly, when the Swiss finally permitted patents on chemical products in 1977, Swiss chemical exports exploded, moving from about 19% of exports to about 35% of exports. I guess the Swiss were probably upset with the "diversion" of money from whereever it was to the highly successful and valuable export market.

To say that Swiss companies were "innovative" without patents may be correct. However, once Swiss companies became inventive, they used patents and other market restricting devices routinely, and that is evidence-based.

As for explaining the "market failure" that requires patents, that has in fact been explained by the societies that implement such policies, going back to ancient times.

When the city of Sybaris in Italy permitted an inventor the rights to all profits for a year, the city was signaling that such inventions were highly desirable and wanted to encourage more such inventions. Would these inventions have occurred eventually? Probably. But when; in 20 years, 30 years, 100 years?

Cities and governments have always seen making things happen faster as beneficial. Thus, every technologically inventive society eventually turns to patents as a technique for getting information exposed faster and to get society to "divert" money to companies that are inventive. Yes, some of the diversion is away from companies that are "innovative." However, eventually all that technology is available to everyone, in many cases faster than it would have otherwise been developed. Sometimes bizarrely faster.

I recently read "The Engine That Could," the story of a diesel engine manufacturer. It took most of a couple of decades to perfect a fuel injector that the market was uninterested in (except for that manufacturer). However, once the injector was perfected (nothing like a couple of decades of investment and experimentation, which would have cost millions in today's dollars), it was patented and became highly desirable. No one else focused the kind of attention on the injector, focusing instead on other, ultimately less successful, approaches.

In fact, Cummins is one of those companies that continually chose paths that seemed less obvious, and less desirable, to the market place, in the short term, but in the long term they have had the better products.

Question: In our modern society, would a company that was either unsuccessful or marginally successful for 20 or 30 years have been tolerated? There was no way to know in the decades the company lost money that it would eventually be a market leader. I suppose in the 1920's and 1930's you would have said they were not innovative because they executed poorly on bringing a product to market. You may well have been one of those recommending in investing in their products because they were not innovative (though they were inventive). Yet, their "faith" in their technology ultimately made them a winner. How fortunate for the market that their patents gave them a chance to recoup twenty years of losses, otherwise we might not have a significant independent diesel engine manufacturer, and many, particularly in the trucking industry, would have considered that a market failure.

Good for you Mike. You are finally moving away from knee jerk, right wing reactionary behavior (of the oxy-Rushed Limpblog type) which always involves ad hominem attacks that explain how "clueless" the other side is and explain how you people (yes, I do mean you people) have a *monopoly* on rational thought (despite your claim that you abhor monopolies).

Mike also writes:

You are clearly ignorant of the purpose of property. *Property* ... --the *PURPOSE* of property was for the efficient allocation of *SCARCE* resources. That is, if I have something, you cannot have it at the same time. And, to avoid people fighting over those things and to understand how to allocate those resources, the legal fiction of physical property was created.

Well there you go again Mikey, (to quote the great --cough, cough-- Ronald Raygun) making more ad hominen remarks and demonstrating that you are all for socio-communist take over of everyone's rights except those of yourself and your Limpblog friends.

The human body is not a *SCARCE* resource. At last count, there were about 6.5 Billion of us on this finite sphere. And yet there are certain property rights that under law, we all arguably possess, like the right to be free of unconsented-to trespass on our bodies. In other words, if I don't want you to hit me, and you do that anyway, that is a violation of my property rights --otherwise known as a criminal battery.

Property rights are not about "scarcity" as you so urgently need to argue. They are about drawing a boundary around something and saying YOU may not trespass here --without the owner's permission.

Patent rights are about the same thing. They are about drawing a temporary boundary around something and saying YOU may not trespass here --without the owner's permission.

Mike writes:

So, no, patents are not at all like property rights.

Au contrair Mike. Let me repeat: Patent rights are about drawing a temporary boundary (max 20 years in duration, usually much less) around something and saying YOU may not trespass here --without the owner's permission. That is exactly like a property right.

Mike also writes:

This is also false [about 35 USC 101]. If I invent the claimed machine, process or whatever... and someone else invented it first, then I am not protected. In fact, I cannot make and sell the very thing I invented. That's a massive problem.

Oh, come off it Mikey.
You know very well that 35 USC 101 qualifies the inventing act with requiring a "new and useful" machine, process, etc.

Fool your Tech-Dirty readers and shame on them (for being ignorant about patents).
But don't try that crapola on me.
Under patent law, YOU are free to invent an almost infinite number of new and useful things. So why cry so much about a little bit of spilled milk?

Go ahead and invent away to your heart's content. Invent all those things that you afterwards deem "obvious". And just to show what a good guy you are, dedicate all your inventions to the public.

In other words, if the patent (or the system itself) serves to NOT promote the progress, or even to *hinder* the progress, then it is unconstitutional.

There are better citations related specifically to patents, but a copyright case should suffice to comment on this point. Much was made by opponents of the Sonny "Look out for that tree" Bono "Copyright Term Extension Act". It hindered progress by extending the term of copyright for many works about to enter the public domain. Certainly this is a hindrance. It fundamentally changed the quid pro quo for these works because, after all, what could possibly be the incentive for works created decades ago. Etc., etc., etc. Per the analysis offered in comments to the article, then cleary Sonny's Act had to be unconstitutional and struck down because it did not promote "progress" as "mandated" in Article 1, Section 8, Clause 8 of the US Constitution.

We all know what happened in this case, Eldred v. Ashcroft. The challenge that Sonny's Act was unconstitutional went down in flames as its constitutionality was upheld by a wide margin (7-2, Justice Ginsburg writing the majority opinion, and Justice Breyer and Justice Stevens writing individual dissents.)

Re: Re: Re: Re: You Don't Have to be Clueless

You almost had me there. For a minute I thought you might be serious.

I'm incredibly serious. Anyone who's built a successful business knows that it's about serving your customers and growing your market. "Protecting" is the last thing on your mind. If you're focused on protecting anything, you've already failed.

"Know-how" is more times than not the most important discriminator for one's product. It is in the case of the original developer the very essence of a scarce resource, as is many times also the case with the developer's trade secrets. Should our economic system ever reach the point where a product developer must at the time of placing a product in the marketplace also publicly file a complete TDP, subcontracting sources, cost and pricing data, marketing plans, product support and maintenance procedures, special tools and test equipment, and the myriad of other relevant information that would fully enables a competitor to immediately replicate and sell the product in the marketplace in direct competiton with the product developer, then at that point in time I will agree with you. However, I am not holding my breath until that time arrives.

Re: Re: Re: Patents don't account for the natural series of events

AC:

I absolutely agree. However, the agreement was related to the seeds. The agreement states that the owner will not save seeds and will not pass them on to anyone else. Yes, there is underlying intellectual property, but the agreement is focused on the product and use of the product. To characterize the contract as an "intellectual property agreement" hides the real intent of the contract.

Re: Re: Re: Re: Re: Re: You Don't Have to be Clueless

It is virtually impossible to show "benefits" from patents when you can always claim that patents cause a diversion of money. The second is absolutely true. Patents do cause a diversion of money. The question is whether the diversion is more beneficial to society than the use it would have otherwise been put to.

That's not true at all. You can look at macro-level studies concerning the amount of innovation done in similar locations at similar times both with and without patents, and you can look at studies done in periods both before and after patent protection in countries. Neither is perfect, but if done enough, it gives you a pretty good picture into the impact of patent protection. And.... the winner is.... it doesn't help innovation. Quite often is hinders it.

On the other hand, just as I am unable to prove that the "diversion" is more beneficial than what the money would have been spent on otherwise, I am unable to prove that lack of diversion is more beneficial than diversion. Free marketers claim that non-diversion is more beneficial because they have faith in the free market, even though the "free market" was a failure at the outset and prompted regulation, even in ancient times. I have more faith in patents than I do in a free market. At least I can see what I am getting with a patent.

Yes, and with a sugar monopoly you know what you're getting too, but pretty much all of our economic history has shown that what you're getting is screwed... royally.

Re: Re: Re: Re: Re: Re: You Don't Have to be Clueless

I keep running mathematical scenarios regarding patents and investment paybacks. The problem I have is that without patents, the investments all focus into investments that payback in 1 to 3 years. If I cheat a little, I can stretch as far as 5 years. If lack of patents makes any investment with more than a 5 year payback economically undesirable, we are handicapping growth in entire industries, particularly manufacturing industries, excluding most, but not all, electronics.

I didn't know that it was your creativity alone that could craft business models. The fact that you happen to not have the creativity to come up with business models stretching out beyond five years is not particularly compelling. No offense to you, but one of the other 6 billion people on this earth (actually, a few of them) are likely to find those business models. I'd rather trust them than have you ruin the entire market due to your own lack of creativity.

As for pharma, at least for the United States that does not appear to be accurate. Somewhere around 40 to 50% of all R&D dollars in the U.S. are focused on pharm. The remainder is focused in other areas. I do not know about other countries.

And you think that's reasonable?

Except, this statement is not complete. According to various sources on the internet, Swiss chemical companies began being inventive in the late 1880's. Interestingly, Swiss chemical companies began patenting in other countries, protecting their inventions in other countries, in advance of the 1907 change to Swiss law that permitted patenting of those same inventions in Switzerland.

Um, that's not accurate. Swiss companies did patent in other countries, but it was not "in advance of the 1907 law" it was all along. In fact, as I already stated earlier in the thread, the rate of patenting in other countries by Swiss firms prior to and post 1907 did not change significantly. In other words, the entire reason for putting the patent law in place (to increase inventiveness) DID NOT WORK.

Also, it is not at all hypocritical for Swiss firms to use patents in other countries. If those countries are going to give an unfair advantage to certain companies, why *wouldn't* they take advantage of it.

Swiss chemical companies became even worse with time. They formed cartels with German and French companies to control prices, market and supply, and only abandoned cartels in 1951 when the United States was looking into trusts.

Yes. You see what happened. Prior to patents, it was a highly competitive industry. Once patents were in place they could get away with forming cartels. Again, this supports my arguments on the *harm* done by patents. If there weren't patents, no cartel would be effective.

Most interestingly, when the Swiss finally permitted patents on chemical products in 1977, Swiss chemical exports exploded, moving from about 19% of exports to about 35% of exports. I guess the Swiss were probably upset with the "diversion" of money from whereever it was to the highly successful and valuable export market.

Again, this supports my position as well. Of course money is going to go into the protected industry. That's what protectionism does. That doesn't show that it was a *good* thing for anyone. That money could have been much more efficiently spent, increasing the economy much more effectively.

As for explaining the "market failure" that requires patents, that has in fact been explained by the societies that implement such policies, going back to ancient times.

Cities and governments have always seen making things happen faster as beneficial. Thus, every technologically inventive society eventually turns to patents as a technique for getting information exposed faster and to get society to "divert" money to companies that are inventive. Yes, some of the diversion is away from companies that are "innovative." However, eventually all that technology is available to everyone, in many cases faster than it would have otherwise been developed. Sometimes bizarrely faster.

Again, the economic evidence does not support that conclusion at all. You can understand the *thought* process and the *myth* behind patents to support such a view (hell, you've bought into it hook, line and sinker). But the actual evidence, and thinking a few levels deep show why it's not true.

It's just as many people used (and, unfortunately still) believe that protectionist tariffs are good for the economy. It only thinks one level deep, and doesn't take into account the eventual reactions.

Question: In our modern society, would a company that was either unsuccessful or marginally successful for 20 or 30 years have been tolerated? There was no way to know in the decades the company lost money that it would eventually be a market leader. I suppose in the 1920's and 1930's you would have said they were not innovative because they executed poorly on bringing a product to market. You may well have been one of those recommending in investing in their products because they were not innovative (though they were inventive). Yet, their "faith" in their technology ultimately made them a winner. How fortunate for the market that their patents gave them a chance to recoup twenty years of losses, otherwise we might not have a significant independent diesel engine manufacturer, and many, particularly in the trucking industry, would have considered that a market failure.

Huh? I'm not sure how that supports your point. The company did all that inventing prior to getting the patent. Once they had the product, they had many ways to recoup that money. Your mistake is assuming they needed the patent to do so. They did not.

The only one "moving around" is you, who obviously did no research at all before spewing, and now has to tap dance to the other extreme to try to find something (incorrect) to tar me with. You might have gotten a lot further if you'd actually tried learning first. I did warn you not to post again without doing research. It appears you did not do so.

Tragic.

But if you really want to display your ignorance, that is your choice.

The human body is not a *SCARCE* resource.

Hmm? Actually it is. Can you explain to me under what definition it is not?

At last count, there were about 6.5 Billion of us on this finite sphere.

Indeed. And 6.5 billion is well short of infinite. Making it a scarce resource indeed.

And yet there are certain property rights that under law, we all arguably possess, like the right to be free of unconsented-to trespass on our bodies. In other words, if I don't want you to hit me, and you do that anyway, that is a violation of my property rights --otherwise known as a criminal battery.

Property rights are not about "scarcity" as you so urgently need to argue. They are about drawing a boundary around something and saying YOU may not trespass here --without the owner's permission.

That is your definition. It's wrong, but that's fine. One of these days you might learn. Yes, that may be the *impact* of property rights, but not their *reason*. Property rights were designed for one thing and one thing only: to more efficiently allocate scarce resources. That is all.

Patent rights are about the same thing. They are about drawing a temporary boundary around something and saying YOU may not trespass here --without the owner's permission.

No. This is wrong. Patent rights are about putting *artificial* scarcity on an infinite resource.

Read your Thomas Jefferson.

"Stable ownership is the gift of social law, and is given late in the progress of society. It would be curious then, if an idea, the fugitive fermentation of an individual brain, could, of natural right, be claimed in exclusive and stable property. If nature has made any one thing less susceptible than all others of exclusive property, it is the action of the thinking power called an idea, which an individual may exclusively possess as long as he keeps it to himself; but the moment it is divulged, it forces itself into the possession of every one, and the receiver cannot dispossess himself of it. Its peculiar character, too, is that no one possesses the less, because every other possesses the whole of it. He who receives an idea from me, receives instruction himself without lessening mine; as he who lights his taper at mine, receives light without darkening me. That ideas should freely spread from one to another over the globe, for the moral and mutual instruction of man, and improvement of his condition, seems to have been peculiarly and benevolently designed by nature, when she made them, like fire, expansible over all space, without lessening their density in any point, and like the air in which we breathe, move, and have our physical being, incapable of confinement or exclusive appropriation. Inventions then cannot, in nature, be a subject of property."

Au contrair Mike. Let me repeat: Patent rights are about drawing a temporary boundary (max 20 years in duration, usually much less) around something and saying YOU may not trespass here --without the owner's permission. That is exactly like a property right.

You can repeat it all you want. It doesn't make you sound any more informed then when you falsely stated it earlier. A property right sets the boundaries for a scarce good. Those are easy to understand and clear to everyone involved.

A patent does not do that at all. It takes an infinite good, and imposes artificial scarcity on it. The boundaries (unlike with real property) are not at all clear, and it can even apply to an invention that someone came up with entirely independently. That's not a property right. That's destruction of resources.

You know very well that 35 USC 101 qualifies the inventing act with requiring a "new and useful" machine, process, etc.

Yes. That doesn't change what I said at all. If you invent something, and then I invent it independently, you can block me from using my own invention.

Under patent law, YOU are free to invent an almost infinite number of new and useful things. So why cry so much about a little bit of spilled milk?

It's not spilled milk. It's about innovation. And how much damage the patent system does to it by acting as a tax.

The reason for this is simple, if you were to merely have a willingness to look at the research (of which you clearly have not bothered to look at all). Innovation is an ongoing process. The inventive part of it is a small fraction of the importance, yet the patent system puts undue weight on the invention, and allows the inventor to block any and all *innovation*.

Anyone who's ever actually built a successful business knows that the initial idea is pretty meaningless. It's a starting point on a journey to build something meaningful and useful for customers. That involves starting with an idea, but then plenty of trial and error goes into perfecting the actual product. Yet, a patent denies the most important part of that innovation: the competition among many firms to build on that idea to find the right formula to make it useful for customers.

Per the analysis offered in comments to the article, then cleary Sonny's Act had to be unconstitutional and struck down because it did not promote "progress" as "mandated" in Article 1, Section 8, Clause 8 of the US Constitution.

We all know what happened in this case, Eldred v. Ashcroft. The challenge that Sonny's Act was unconstitutional went down in flames as its constitutionality was upheld by a wide margin (7-2, Justice Ginsburg writing the majority opinion, and Justice Breyer and Justice Stevens writing individual dissents.)

Yes, the Eldred decision. A dreadful decision (in part due to it being poorly argued by Lessig) that will one day be overturned as a huge mistake. It's a black mark on the history of the Supreme Court.

Re: Re: Re: Re: Re: You Don't Have to be Clueless

Should our economic system ever reach the point where a product developer must at the time of placing a product in the marketplace also publicly file a complete TDP, subcontracting sources, cost and pricing data, marketing plans, product support and maintenance procedures, special tools and test equipment, and the myriad of other relevant information that would fully enables a competitor to immediately replicate and sell the product in the marketplace in direct competiton with the product developer, then at that point in time I will agree with you. However, I am not holding my breath until that time arrives.

Um. You just proved my point, thank you. The fact that it takes more than just the idea to build a successful product shows why patents are often not necessary at all.

The fact that all of that information remains confidential (which it does currently) is hardly damaging to the system.

So, thank you for proving my point. Competition can occur just fine in the absence of patents, because it takes more than just the invention to build a business.

Believe if you wish that Eldred was a huge mistake and a black mark for the Supreme Court, but it does not change the fact that long standing constitutional principles were involved that the Supreme Court readily embraced, principles tracing their roots to the early 1800's.

Our course you were disappointed by the outcome. However, the issue was not one of constitutional proportions. If the law is ever to be changed, it is Congress, and not the Supreme Court, that has that responsibility.

patents

I basically agree, but let me add some comments to this list. You posted:
1. If you sue someone for infringement and lose, you pay the defendants' legal costs.
2. "Use it or lose it." If you're not putting the patent into practice, you don't get to use it.
On the first item, this has been tried, and it is a broken model (you pointed that out).
On the second, I basically agree, and have been saying essentially that for years.
But there are two real problems with the system, which could work as well as the founders of our country intended:
1. Legislators are becoming more and more dependent on campaign funds - without campaign finance reform, we will become "owned" by the wealthy, and patent reform (or other more important things, health care, etc.) won't happen.
2. The USPTO is funded entirely by fees - it is unrealistic to ask them to cut off their funding by being tough on patent applicants. That business model is broken.

Re: You Don't Have to be Clueless

It is virtually impossible to show "benefits" from patents when you can always claim that patents cause a diversion of money. The second is absolutely true. Patents do cause a diversion of money. The question is whether the diversion is more beneficial to society than the use it would have otherwise been put to.

That's not true at all. You can look at macro-level studies concerning the amount of innovation done in similar locations at similar times both with and without patents, and you can look at studies done in periods both before and after patent protection in countries. Neither is perfect, but if done enough, it gives you a pretty good picture into the impact of patent protection. And.... the winner is.... it doesn't help innovation. Quite often is hinders it.

Park and Ginarte studied 60 countries from 1960 to 1990 and concluded that strengthening of patent protection increased innovation.

The Swiss chemistry industry increased innovation after chemical products were protected by patents in 1977.

I know I am convinced.

On the other hand, just as I am unable to prove that the "diversion" is more beneficial than what the money would have been spent on otherwise, I am unable to prove that lack of diversion is more beneficial than diversion. Free marketers claim that non-diversion is more beneficial because they have faith in the free market, even though the "free market" was a failure at the outset and prompted regulation, even in ancient times. I have more faith in patents than I do in a free market. At least I can see what I am getting with a patent.

Yes, and with a sugar monopoly you know what you're getting too, but pretty much all of our economic history has shown that what you're getting is screwed... royally.

Your sarcasm may be mildly humorous, but I expect more from someone of your intelligence.

Patents are a benefit to society, when properly set up and enforced, as has been shown repeated times, even by anti-IP foes. Indeed, the anti-IP folks periodically discover that without patents they need to figure out how to substitute for the benefit of patents. While I take a certain amount of pleasure at the discomfort of people discovering that patents provide a benefit to society, the more important fact is that dozens of researchers have found that patents lead to societal benefits.

Yes, you can, by selecting data, "prove" that patents are bad, but every study I have seen so proving in fact is dreadfully biased and tends to put much weight on the data that most supports the "proof" that patents are bad. Ignoring statistical methods is definitely an aid to proving patents are bad.

Re: You Don't Have to be Clueless

I didn't know that it was your creativity alone that could craft business models. The fact that you happen to not have the creativity to come up with business models stretching out beyond five years is not particularly compelling. No offense to you, but one of the other 6 billion people on this earth (actually, a few of them) are likely to find those business models. I'd rather trust them than have you ruin the entire market due to your own lack of creativity.

I would rather trust a proven intellectual property system than your belief, which I believe is misplaced, that there is a free market solution that will permit the investments that got us such inventions as the laser and the diesel engine.

As for pharma, at least for the United States that does not appear to be accurate. Somewhere around 40 to 50% of all R&D dollars in the U.S. are focused on pharm. The remainder is focused in other areas. I do not know about other countries.

And you think that's reasonable?

I have no idea. For all I know, the amount is too low. I do not believe that, or think that, but neither am I omnipotent, and neither are you.

Except, this statement is not complete. According to various sources on the internet, Swiss chemical companies began being inventive in the late 1880's. Interestingly, Swiss chemical companies began patenting in other countries, protecting their inventions in other countries, in advance of the 1907 change to Swiss law that permitted patenting of those same inventions in Switzerland.

Um, that's not accurate. Swiss companies did patent in other countries, but it was not "in advance of the 1907 law" it was all along. In fact, as I already stated earlier in the thread, the rate of patenting in other countries by Swiss firms prior to and post 1907 did not change significantly. In other words, the entire reason for putting the patent law in place (to increase inventiveness) DID NOT WORK.

Um, that is accurate. As far as I have been able to research, the Swiss began patenting in other countries in the late 1880s, which according to my math is before patent protection was granted in Switzerland in 1907.

As for your other statement, I have found no evidence that your statement is correct. You stated that the reason for putting patents in place was increasing inventiveness. The fact is that Swiss companies were already being inventive and were playing both ends against the middle by patenting in other countries and copying the patented inventions of companies from other countries. Swiss chemical companies opposed patents because it would reduce, in their words, copying, stealing and imitating. However, Switzerland had signed international agreements dating back to before the Swiss chemical companies became innovative supportive of a patent system and the Swiss were determined that such a system was in the best interests of the country. The only thing that the creation of process patents did for society was place all companies on a more equal playing field.

Also, it is not at all hypocritical for Swiss firms to use patents in other countries. If those countries are going to give an unfair advantage to certain companies, why *wouldn't* they take advantage of it.?

From my perspective, they were hypocritical. They testified that patents would destroy their industry (completely untrue) and would give other countries an unfair advantage (also untrue and spoken like a true monopolist). However, at the same time they were speaking of the evils of patent systems, they were routinely using them. In MY mind, that is complete hypocrisy.

Swiss chemical companies became even worse with time. They formed cartels with German and French companies to control prices, market and supply, and only abandoned cartels in 1951 when the United States was looking into trusts.

Yes. You see what happened. Prior to patents, it was a highly competitive industry. Once patents were in place they could get away with forming cartels. Again, this supports my arguments on the *harm* done by patents. If there weren't patents, no cartel would be effective.

There are references on the internet that show that German companies were successful in stifling infant American chemical industries, and these same articles state that it would have been easy for German chemical companies to do the same thing to Swiss companies. However, Swiss companies were also great customers of German chemical companies, so running them out of business would have been stupid. The happy medium was that Swiss companies focused on specialty dies, leaving German companies to focus on high volume dies. While patents may have been part of the strategy, German companies became quite effective at predatory pricing and running competitors out of business (I know, predatory pricing does not work, but tell that to the American chemical companies who could not lower their prices enough to compete with German chemical companies).

Most interestingly, when the Swiss finally permitted patents on chemical products in 1977, Swiss chemical exports exploded, moving from about 19% of exports to about 35% of exports. I guess the Swiss were probably upset with the "diversion" of money from whereever it was to the highly successful and valuable export market.

Again, this supports my position as well. Of course money is going to go into the protected industry. That's what protectionism does. That doesn't show that it was a *good* thing for anyone. That money could have been much more efficiently spent, increasing the economy much more effectively.

Let me get this straight. The Swiss patent system protected everything but the product of chemical processes. The patent systems of all other countries on earth protected chemical processes. When the Swiss included the products of chemical processes in patent protection, suddenly exports of these items explode as more money is invested in these products in a level playing field. Seems to me that obtaining export income is generally a highly valued goal for many societies, and Switzerland increased theirs. There is no evidence that whereever the money was going before was yielding the same measure of benefit to Switzerland.

As for explaining the "market failure" that requires patents, that has in fact been explained by the societies that implement such policies, going back to ancient times.

The other way around. Societies recognized that there were benefits to permitting inventors sole control of their inventions for a limited time. I will not second guess the conclusions made by those government bodies that felt the market would insufficiently value the output of inventors such that inventors would need that protection.

Question: In our modern society, would a company that was either unsuccessful or marginally successful for 20 or 30 years have been tolerated? There was no way to know in the decades the company lost money that it would eventually be a market leader. I suppose in the 1920's and 1930's you would have said they were not innovative because they executed poorly on bringing a product to market. You may well have been one of those recommending in investing in their products because they were not innovative (though they were inventive). Yet, their "faith" in their technology ultimately made them a winner. How fortunate for the market that their patents gave them a chance to recoup twenty years of losses, otherwise we might not have a significant independent diesel engine manufacturer, and many, particularly in the trucking industry, would have considered that a market failure.

Huh? I'm not sure how that supports your point. The company did all that inventing prior to getting the patent. Once they had the product, they had many ways to recoup that money. Your mistake is assuming they needed the patent to do so. They did not.

Strange that you should say "they did not" without offering proof. I believe they did. They believe they did.

Good lord, what arrogance. The invention is a "small fraction" of importance? Just ask any small businessman!

It took decades to develop the first practical laser. I remember sitting around brainstorming uses for laser diodes. We went off to the "businessman" and the "innovator" and they kept saying, we will have a product when you make it cheaper, or more reliable.

Okay, more decades of invention. Finally, after 80 years of development, an "innovator" finally gets his butt on the move. In the meantime, inventors are busily selling lasers and laser diodes for a variety of uses. The innovators and businessmen finally caught on (sometimes they are a little slow), but they were a small fraction of the process. In fact, they had to practically be dragged to see the value of lasers and laser diodes. How fortunate for all of us that by the time innovators caught on that the patents for lasers were long expired. Of course, inventors already had an array of products they were selling, but in lieu of innovators, you have to press on.

Diesel engines are another marvelous example. The world flocked to the first diesel engines. When Clessie Cummins came on the scene he was a nobody. However, even though Clessie struggled with getting people interested in his version of the diesel, he kept inventing. Finally, he had a product worthy of selling and he went out and did his best to sell it. Once again, finally "innovators" caught up with Clessie and his product increased in sales, but it took his decades of belief in his designs and his product to get the innovators interested. Again, innovation was a teensy little fraction of the process.

In general, innovators tend to be late and slow with manufactured products. Though I have also seen "innovators" sell a product before it was ready to sell. Innovators seem to come in two varieties, too late or too early.

An innovator is merely a part of a bigger process that has to start with an invention somewhere. It may be a small fraction of the process in your mind, but without that small fraction the rest just gets you a really fancy buggy with buggy whip.

Good lord, what arrogance. The invention is a "small fraction" of importance? Just ask any small businessman!

It's not arrogance. It's correct. As your examples clearly show.

Okay, more decades of invention. Finally, after 80 years of development, an "innovator" finally gets his butt on the move. In the meantime, inventors are busily selling lasers and laser diodes for a variety of uses. The innovators and businessmen finally caught on (sometimes they are a little slow), but they were a small fraction of the process. In fact, they had to practically be dragged to see the value of lasers and laser diodes. How fortunate for all of us that by the time innovators caught on that the patents for lasers were long expired. Of course, inventors already had an array of products they were selling, but in lieu of innovators, you have to press on.

Honestly, I have no idea what you're saying here as I am unclear how you are defining the inventors and the innovators.

Diesel engines are another marvelous example. The world flocked to the first diesel engines. When Clessie Cummins came on the scene he was a nobody. However, even though Clessie struggled with getting people interested in his version of the diesel, he kept inventing. Finally, he had a product worthy of selling and he went out and did his best to sell it. Once again, finally "innovators" caught up with Clessie and his product increased in sales, but it took his decades of belief in his designs and his product to get the innovators interested. Again, innovation was a teensy little fraction of the process.

Sounds to me like the innovators were a HUGE part of the process. Before they showed up, he couldn't sell his engine. Then they made the product salable. In other words, the real economic value came from the innovation, not the invention.

In general, innovators tend to be late and slow with manufactured products. Though I have also seen "innovators" sell a product before it was ready to sell. Innovators seem to come in two varieties, too late or too early.

Then you don't know what innovators are.

If they're coming too slow or two late, they didn't innovate very well, did they?

An innovator is merely a part of a bigger process that has to start with an invention somewhere. It may be a small fraction of the process in your mind, but without that small fraction the rest just gets you a really fancy buggy with buggy whip.

Yes, the innovator is a part of the process, but they're the part that matters most. Again, recent research on this has showed that it's the innovation that represents somwhere between 75% and 90% of the value created in new products. The invention is a small part.

But with patents, you limit the innovators from participating. And you insist that only the inventor can allow innovation. That's tremendously problematic -- especially when you consider that the true "innovation" usually has little to do with the original invention at all.

Honestly, I have no idea what you're saying here as I am unclear how you are defining the inventors and the innovators.

Let me see. The inventors are the people who spent hundreds of thousands of hours developing laser technology and figuring out how to make lasers cost effective. Once the inventors finished making a product that worked, the innovators came in and put them in a nice shiny box.

Sounds to me like the innovators were a HUGE part of the process. Before they showed up, he couldn't sell his engine. Then they made the product salable. In other words, the real economic value came from the innovation, not the invention.

Let me think. Exactly WHAT did the "innovators" do? Did they change Clessie's invention? Well, no. Hmmm. Did they figure out how to make it faster or cheaper? Well, no. Hmmm. Just WHAT did the "innovators" do? Well, they put the diesels in a nice shiny box, and they did a few other minor things, like improving the distributor network, etc. They did NOTHING to the product (except the nice, shiny box). Of course, that tends to be the case with new, technical products, lots of invention.

How much time did inventors spend figuring out how to make the product work, and how to make the product? Well, probably hundreds of thousands of hours. Okay, how much time did innovators spend getting the product sold? Maybe thousands of hours.

Now, if you are saying that an "innovator-hour" is more important than an "inventor-hour," that is merely perspective. A diesel engine design that takes tens of thousands of hours to develop, and hundreds of hours to innovate, seems to indicate that the role of the inventor is far more important than the role of the "innovator."

A product needed in the market place will be sold regardless of whether innovators happen to be hanging around on the street corner, waiting for an invention to show up so they can innovate. Personally, I care little for "innovators." They seem to like to come in after the device has been invented and take credit for making the product successful. What did they do to the product? Well, the nice, shiny box, of course. They were unable to write the darn manual, the inventor had to do that for them too.

Innovators, pah. THEY have a very high opinion of themselves. I would rather deal with the IRS or politicians, and I do not like either.

Re: Depends on what your definition of "Innovation" is is

Step Back:

You must remember the high value shiny box the innovators put the product into. The product absolutely required that to sell. Plus the picture. Oh yeah, they also did provide distribution, which can be important, but without inventors, what would they distribute? Of course! The ever-popular, highly innovated, BUGGY.

Re: Depends on what your definition of "Innovation" is is

You define "innovation" as the act by way of which Big Business takes an independent inventor's invention and does not pay for it. Very clever.

Not at all. In fact, the research shows how rare that is. Why? Because most big businesses are totally clueless to good new offerings that the market wants. They're hamstrung by legacy issues and unable to compete.

Time and time again we've seen new upstarts overtrhow the old legacy business -- not because of patents, but because the Big Businesses are too slow (and stupid) to compete.

And this is supported by the evidence. In place where there is no or little patent protection there tend to be many *more* smaller companies competing within the industry. It's only when patents are present that you end up with big conglomerates using the patents to build an effective monopoly.

So, no, you are wrong. Again. I suggested before that you learn something before speaking up again. I see you have chosen, instead, to continue displaying ignorance. I suggest, once again, that you learn something before you open your mouth again.

Let me see. The inventors are the people who spent hundreds of thousands of hours developing laser technology and figuring out how to make lasers cost effective. Once the inventors finished making a product that worked, the innovators came in and put them in a nice shiny box.

Heh. So the inventors are so stupid they can't figure out how to put something into a shiny box? No offense, but these inventors you speak of don't deserve a dime.

Look, before you continue down this path, and destroy any respect I had for you, ever, why don't you step back and think about how idiotic what you just wrote sounds. I know you didn't mean it.

The truth of the matter is that innovation is an ongoing process, and inventors are usually a part of that process. I separate out the parts of the process because it's important, but the individuals involved are usually both.

Your definition of innovators as being the people who put something in a shiny box is both wrong, stupid, elitist and offensive.

Please think again before responding again. I have no time to deal with anyone who thinks innovation is putting something in a shiny box. You're not a stupid person. Stop saying stupid things.

Let me think. Exactly WHAT did the "innovators" do? Did they change Clessie's invention? Well, no. Hmmm. Did they figure out how to make it faster or cheaper? Well, no. Hmmm. Just WHAT did the "innovators" do? Well, they put the diesels in a nice shiny box, and they did a few other minor things, like improving the distributor network, etc. They did NOTHING to the product (except the nice, shiny box). Of course, that tends to be the case with new, technical products, lots of invention.

Ok. So, why did Clessie even bother if it was so minor?

Oh, right, because without that help, he'd be out of business and we wouldn't have such engines.

The point of the patent system is to PROMOTE THE PROGRESS. You don't promote the frickin' progress if no one can buy your damn invention.

How much time did inventors spend figuring out how to make the product work, and how to make the product? Well, probably hundreds of thousands of hours. Okay, how much time did innovators spend getting the product sold? Maybe thousands of hours.

You have no clue what innovation is. It's not about "selling" the product. The innovation is about taking the IDEA of the invention and MAKING IT WORK FOR THE MARKET. Chessie had plenty to do in that process, certainly. And yes, the marketers had something to do with that also.

You're a fool if you think that innovators = marketers alone. No one has said that, and you're dismissal of the overall process of innovation is sickening. It's a disgusting elitist statement that shows zero understanding of innovation. And, considering our conversations in the past, I'm sure you know better.

A product needed in the market place will be sold regardless of whether innovators happen to be hanging around on the street corner, waiting for an invention to show up so they can innovate

If that were true, then there would be no "innovators" in your world. Why would they be there if they weren't necessary?

Again, you are not this stupid. Please, please think again.

Now, if you are saying that an "innovator-hour" is more important than an "inventor-hour," that is merely perspective. A diesel engine design that takes tens of thousands of hours to develop, and hundreds of hours to innovate, seems to indicate that the role of the inventor is far more important than the role of the "innovator."

The "DEVELOPMENT TIME" is the INNOVATION. The IDEA is the INVENTION. Making it so that it's a PRODUCT that PEOPLE WANT TO BUY is the INNOVATION.

It's about taking the INVENTION and making it USEFUL. That's not just marketers, though you shouldn't discount their effort.

Innovators, pah. THEY have a very high opinion of themselves. I would rather deal with the IRS or politicians, and I do not like either.

Obviously, the companies you work for have never sold a product. Otherwise, you'd know better than to insult all the folks who have paid your salary.

The INNOVATOR wears no clothes

1. Converting an ordinary rock into a Pet Rock is true INNOVATION.
2. Converting a chunk of sugar-coated breaded chicken fat into a Mig Nugg-it is true INNOVATION. (Disclaimer: Said Mig-Whatever has no relation to any product sold to gullible children as part of their "Happy" meals.)
3. Converting a piece of paper into a default swap derivative is true INNOVATION.
4. Converting an AWOL drunkard into a conservatively compassionate President is true INNOVATION.
5. Converting ... oh what the heck. You know deep in your Madison Avenue manipulated heart of hearts that this list can go on and on with more examples of glorious true INNOVATION.

On the other hand, mere 'invention' with a little "i" is deserving of ridicule and derision because little inventors are not true INNOVATORS. It is only the latter to hold the world on their shoulders, and heaven help us if they should shrug.

We have a major disconnect between the definition of an inventor and an innovator. Inventors are not about ideas. Ideas are not patentable. Inventors are about, or should be about, an actual, genuine configuration.

What does an inventor (or a team of inventors) do? They can either invent a product that solves a market need, or they take input from the friendly, neighborhood marketing folks, and develop an inventive product that meets a market need. This function is what inventors do.

Ideas are meaningless. I have ideas all the time. However, until you turn that idea into a useful device (an inventive function), you have nothing. The patent comes after the invention, not after the idea.

Are there some patents that are so broad that they appear to be more of an idea than an actual device? Probably. Fortunately, the vast majority of those patents end up being shown as being not enabled and they go away. It is annoying to a real inventor when a mere idea is somehow used to block his way. However, no system is ever perfect, especially the free market.

Could I be called an innovator as well as an inventor? I suppose so. Do I care? Yes. When I create something never seen before, something that has commercial use to my company, that is invention. I do not like the term "innovator" because it is slippery and ephemeral. Lots of people like to call themselves innovators who are in fact con men. The same could be said for inventors. There are inventors that invent meaningful devices, and then there are those who invent the next, great belly button lint picker. Sure, it may be inventive, but does that invention have value to anyone? It does not take an innovator to give me the answer to that one.

Re: The INNOVATOR wears no clothes

Step Back:

I had an epiphany last night regarding innovators. By complete coincidence I read "The End" by Michael Lewis. It was the current meltdown from his perspective. What is amazing is that Lewis made millions from the meltdown because he began shorting companies making subprime loans several years ago. His only surprise was that it took longer for the meltdown to happen than it did. But what is more amazing is how the meltdown was set up. Amazing article.

It turns out that Wall Street became enamored of subprime loans. After all, they were providing a product that millions of people wanted to buy (they were true innovators, and incredibly successful). However, once addicted to an innovation, it is hard to halt the addiction, even when you know it will lead to death. Well before the meltdown happened a number of people within the industry tried to point out that subprime loans were time bombs waiting to explode, and when they went off they were going to hurt a lot of people.

The unfortunate thing is that the economy could continue to ride along on the wave of increased real estate values for quite a while, but the reality was that innovators had overvalued execution and were diverting billions from more more valuable activities to supporting subprime loans.

When the boom finally came the true magnitude of what innovators had done finally hit home. Yes, they delivered a highly desirable product bought by millions, but when the millions could no longer pay for the product the economy tanked, literally. The stock market punished itself for the billions in diverted dollars with a loss valued in the trillions. We know what has happened to the rest of the economy.

Though I keep seeing fingers pointed at inventors for diversion of dollars through patents, regardless of how you measure the dollars the amount is never higher than a few billion dollars per year. I saw one report that tried to estimate the affect of patents on the economy and the best they could do was somewhere around $12 billion per year. The innovators that sold millions of subprime loans have diverted hundreds of billions that could have been better spent on many other things and cost trillions of dollars in damage to the economy.

It is a general rule of thumb in the technical world that the earlier you catch something, the cheaper it is to fix. If you catch it in design, the fix may be $100. If you catch it in prototype, the fix may be $10,000. If you catch it in customer testing, the fix may be $100,000. But once the product gets into the market place the cost can easily be in the millions. The same thing holds in a broader sense.

The cost of research may be high, but it is typically spread out over many years and the benefits extend for decades or even centuries.

The cost of invention can vary substantially, going from significantly less than research to significantly more, but the benefits can extend years to decades.

Innovation, on the other hand, has a powerful up side and a powerful down side. When an innovator successfully brings a product to market that the market "demands," it can be a good thing for the market. But a successful innovator can also bring a product to market that hundreds of thousands of customers discover is crappy, yes, the product ultimately fails, but not before the innovator has made millions from money diverted from more worthwhile pursuits.

Innovators may well be the most powerful force in the stream, as Mike has stated. However, with great power comes great responsibility, one that innovators abuse frequently, causing some of the greatest waste and diversion of resources in history.

Are there abuses in the patent system and abuses of the patent system? Yes. Has the patent system sometimes caused diversion of money and resources? Yes. However, the same thing can be said for innovation. The major difference is that once the product gets into the hands of innovators the diversions and abuses have way more zeros in the dollar value than inventors ever saw in their wildest dreams.

Next time someone points the finger at patents and inventors and claims they are overvalued, look behind the curtain and see if there is an innovator standing there who is busily overvaluing innovation.

The INNOVATOR dwarfs the puny inventor (was --wears no clothes)

Lonnie writes:

Though ... fingers [are] pointed at inventors for diversion of dollars through patents, regardless of how you measure the dollars, the amount is never higher than a few billion dollars per year. ... [However] The INNOVATORS that sold millions of subprime loans have diverted hundreds of billions that could have been better spent on many other things and cost trillions of dollars in damage to the economy.

Lonnie, you're only proving Mike's point for him. INNOVATORS are the giants of our society who shake and move the world. The little "i" inventors, on the other hand, are puny dwarfish creatures who are not worthy of notice or compensation because their clueless, stupid, ridicule-worthy, imbecile ideas never did anything for the world on the scale that the INNOVATORS work on.

Did Edison's light bulb (and phonograph, and movie camera, ...) set the markets ablaze the way that only Bernie Madoff's true INNOVATION could? No.

Did Morse's dumb as a dash and a dot telegraph bail the financials out the way that only Hank Paulson's 3-page bailout INNOVATION could? No.

The list goes on and on. But to credit any of the puny little "i" inventors with mention of their names would do dishonor to the GIANT INNOVATORS of our past, present and future. It is by convincing the public to buy products as if they really really wanted them, that the GIANT INNOVATORS of our world support that globe up on their shoulders. Heaven forbid that these Atlas's should shrug, neglect their ever vigilant watch, and allow even one inventor to be awarded a patent! Good job Lonnie.

Re: The INNOVATOR dwarfs the puny inventor (was --wears no clothes)

Did Edison's light bulb (and phonograph, and movie camera, ...) set the markets ablaze the way that only Bernie Madoff's true INNOVATION could? No.

Actually, step back once again shows his level of ignorance. Edison was *much* more of an innovator than an inventor, and that's a good thing. Almost all of his so-called "inventions" were actually done by others. Edison figured out how to make people want to buy them, though, and then took *credit* for the invention part, even though it was a lie.

Did Morse's dumb as a dash and a dot telegraph bail the financials out the way that only Hank Paulson's 3-page bailout INNOVATION could? No.

Morse was actually both a good inventor and a good innovator.

Other than that, thinking that Madoff or Paulson is an innovator (no matter how sarcastic you may be) shows once again that you have absolutely no clue. I'm done with this conversation. Display your idiotic thoughts elsewhere.

Re: The INNOVATOR dwarfs the puny inventor (was --wears no clothes)

Most dictionaries define innovation as "introduction of something new." By this definition, all inventions are innovations, but not all innovations are inventions. However, this definition does not seem operative on this web site.

I found this definition for innovation over at Business.com:

Process by which an idea or invention is translated into a good or service for which people will pay. To be called an innovation, an idea must be replicable at an economical cost and must satisfy a specific need.

However, what if the invention as conceived is a good for which people will pay? I suppose someone here would claim that "innovation" happened. Brother. Sounds like good quality inventing to me. You invented a product for which people will pay.

Innovation is quickly becoming one of those over-used words that has become nearly meaningless. Innovation is applied to everything. The only real difference I see between invention and innovation from a practical viewpoint is that an invention "becomes" an innovation when a customer buys it. Whatever. It is still an invention. The question is whether an invention has commercial value or not. Even "innovations" have a continuum of value. If one person buys it, it is a little innovative. If a million people buy it, it is really innovative.

I am reminded of the sow's ear to silk purse. If the underlying invention is desirable, it will appeal to a lot of customers. If the underlying invention is undesirable, no amount of innovation will help it.

I think the patent system actively works against its stated purpose ("to promote the progress of science and the useful arts").

I also really want to know, are there any examples of patents which have actually served this purpose, that is to promote the progress of science and/or useful arts. I believe part of the 'deal' is also supposed to be disclosure of the invention so that it will eventually be part of the heritage of knowledge.

Then that evidence should be weighed against the costs in the same field(s) to having patents. Finally, why can't a copy-right; that is the right for me to copy your property, suffice? That should not preclude independent invention or rediscovery. If it's that easy to reproduce or you are willing to spend that much effort for something difficult then it should be obvious (or at least logical) to anyone who believes it is possible.

Are there any examples?

Michael asks politely:

I also really want to know, are there any examples of patents which have actually served this purpose, that is to promote the progress of science and/or useful arts. I believe part of the 'deal' is also supposed to be disclosure of the invention so that it will eventually be part of the heritage of knowledge.

Yes Michael, there are examples.

In many traditional patents, there is a "Background" section that discusses older patents and how those earlier patents tried to deal with a given problem. The inventor of the newer patent has to consider all the teachings of the older patents and then come up with something different, as well as nonobvious over the teachings of the older patents.

So the older patents are indeed serving the function of promoting progress by forcing the later inventor to come up with something novel and nonobvious relative to the prior art disclosed in the older patents

In so far as the "deal", that too, happens all the time. Unless an inventor requests "nonpublication", all US patent applications are published (opened to the public) 18 months after they are filed; even if no patent has yet been awarded.

So the "idea" behind the invention is freely disseminated to the public at 18 months even if that happens before the inventor gets his patent. Then other people can take the published idea and build on it. How do you like them apples?